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Journal Communications Inc. Reports Operating Results (10-Q)

August 04, 2009 | About:

Journal Communications Inc. (JRN) filed Quarterly Report for the period ended 2009-06-28.

Journal Communications is a diversified media and communications company with operations in newspaper publishing radio and television broadcasting telecommunications and printing services. In addition they operate a label printing business and a direct marketing services business. Journal Communications Inc. has a market cap of $165.1 million; its shares were traded at around $3.03 with a P/E ratio of 14.4 and P/S ratio of 0.3.

Highlight of Business Operations:

Results of Operations Second Quarter Ended June 28, 2009 compared to the Second Quarter Ended June 29, 2008 Our consolidated revenue in the second quarter of 2009 was $109.4 million, a decrease of $30.7 million, or 21.9%, compared to $140.1 million in the second quarter of 2008. Our consolidated operating costs and expenses in the second quarter of 2009 were $63.3 million, a decrease of $16.6 million, or 20.7%, compared to $79.9 million in the second quarter of 2008. Our consolidated selling and administrative expenses in the second quarter of 2009 were $37.1 million, a decrease of $6.5 million, or 15.0%, compared to $43.6 million in the second quarter of 2008. Broadcast license impairment was $19.0 million in the second quarter of 2009.

Retail advertising revenue in the second quarter of 2009 was $23.4 million, a decrease of $5.2 million, or 18.2%, compared to $28.6 million in the second quarter of 2008. The $4.4 million decrease at our daily newspaper was primarily due to a decrease in ROP and preprint advertising in consumer-driven categories. As consumers have less discretionary income, advertisers are decreasing their spending. The most significant decreases were in the furniture and furnishings, finance/insurance, dining and entertainment, automotive, health services, home improvement, department stores, finance/insurance, small-retailers, food, real estate and business services categories. The same trends persisted in our community newspapers and shoppers business. The $0.8 million decrease at our community newspapers and shoppers business was primarily due to decreases in automotive, small-retailers and real estate advertising, partially offset by revenue from publications acquired in Northern Wisconsin and Florida in late 2008.

Classified advertising is generally the most sensitive to economic cycles because it is driven by the demand of employment, real estate transactions and automotive sales. As a result of the current economic recession and the ongoing secular trend of classified advertising transitioning to the internet, our publishing businesses experienced a significant decrease in classified advertising revenue in the second quarter of 2009 compared to the second quarter of 2008. Classified advertising revenue in the second quarter of 2009 was $7.2 million, a decrease of $6.5 million, or 46.8%, compared to $13.7 million in the second quarter of 2008. At our daily newspaper, print and online classified advertising revenue decreased by 52.6% from the second quarter of 2008. Specifically, the employment category decreased $3.4 million, or 70.5%; automotive decreased $1.4 million, or 55.3%; real estate decreased $1.3 million, or 47.3% and other decreased $0.3 million, or 14.1%. The average rate per inch of classified advertising has decreased primarily due to the significant decrease in employment classified revenue which, historically, has been at a higher rate than other categories. The same trends persisted in our community newspapers and shoppers business. At our community newspapers and shoppers business, a decrease in automotive, employment and real estate classified advertising revenue was partially offset by an increase in classified advertising revenue from newly acquired publications in Northern Wisconsin and Florida in late 2008 and an increase in legal classified advertising in Florida due to an increase in foreclosure notices.

Interactive advertising revenue is reported in the various advertising revenue categories. Total retail and classified interactive advertising revenue at our publishing businesses was $2.6 million in the second quarter of 2009, a decrease of $1.2 million, or 32.4%, compared to $3.8 million in the second quarter of 2008. Interactive classified advertising revenue at the daily newspaper was $1.0 million in the second quarter of 2009, a decrease of $1.4 million, or 59.9%, compared to $2.4 million in the second quarter of 2008. The $1.4 million decrease was primarily due to decreases in automotive classified advertising of $0.7 million, or 78.8%, and employment classified advertising of $0.7 million, or 58.4%. The current economic recession has negatively impacted automotive and employment online advertising revenue. In the second quarter of 2009, revenue from automotive online classified advertising at our daily newspaper was negatively impacted by the transition to a new franchise relationship with CarSoup.com.

Other revenue, which consists of revenue from promotional and commercial distribution and commercial printing revenue at our daily newspaper and commercial printing at the printing plants for our community newspapers and shoppers, accounted for 8.2% of total publishing revenue in the second quarter of 2009 compared to 6.9% in the second quarter of 2008. The increase as a percentage of total revenue is due to the decrease in advertising revenue and the overall decline in total revenue. Other revenue in the second quarter of 2009 was $4.1 million, a decrease of $0.1 million, or 5.0%, compared to $4.2 million in the second quarter of 2008. The $0.1 million decrease at our daily newspaper was primarily due to a decrease in commercial printing revenue due to volume declines as certain customers reduced page counts and number of copies and the loss of certain customers. This decrease was partially offset by an increase in commercial delivery revenue from additional routes for USA Today.

Our publishing businesses returned to profitability in the second quarter of 2009 after posting an operating loss in the first quarter of 2009. Publishing operating earnings in the second quarter of 2009 were $3.3 million, a decrease of $2.4 million, or 42.2%, compared to operating earnings of $5.7 million in the second quarter of 2008. The decrease in operating earnings was due to the decrease in advertising revenue. Our publishing businesses continue to reduce their expense platforms to align them with the reduced revenue base. Total expenses decreased $10.0 million, or 17.8%, in the second quarter of 2009 compared to the second quarter of 2008, primarily due to a decrease of $4.5 million in payroll-related costs. Since the end of 2007, our full-time employee count for our publishing businesses has decreased by 20.2%. Excluding payroll-related costs, operating costs and expenses decreased $3.9 million in the second quarter of 2009 compared to the second quarter of 2008, the most significant of which was newsprint and paper costs and online fees at our daily newspaper. Total newsprint and paper costs for our publishing businesses in the second quarter of 2009 were $4.5 million, a decrease of $2.3 million, or 34.0%, compared to $6.8 million in the second quarter of 2008 due to a 27.7% decrease in newsprint consumption and a 10.0% decrease in average newsprint pricing per metric ton. Consumption of metric tonnes of newsprint in the second quarter of 2009 decreased primarily due to decreases in average net paid circulation, ROP advertising and editorial pages. Online fees at our daily newspaper decreased by $0.6 million in the second quarter of 2009 compared to the second quarter of 2008 primarily due to the transition to a new franchise relationship with CarSoup.com and due to the decrease in interactive employment classified advertising. Legal fees decreased by $0.3 million in the second quarter of 2009 compared to the second quarter of 2008 due to a $0.4 million contract termination charge in the second quarter of 2008. Partially offsetting the expense decreases, bad debt expense increased $0.2 million in the second

Read the The complete ReportJRN is in the portfolios of Third Avenue Management.

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